Here it is, folks, the quote of the day (from yesterday), courtesy of Federal Reserve Board Chairman Ben “Helicopter” Bernanke:
“Our ability to forecast three and four years out is obviously very limited.”
Here’s what’s really amazing about Bernanke’s frank assessment of his club’s prognostication prowess…
It came on the heels of his pronouncement – after a two-day confab of the Federal Open Market Committee for the Everlasting Future of Big Banks, Bigger Bonuses, and Rampant Speculation with Cheap Leveraged Financing for All – that’s their full name – that the Fed expects to keep short rates “near zero” (yes, that’s a “0″ with several zeroes behind it) until 2014, or until Ron Paul becomes president, whichever comes first.
What’s comforting about such decisive action in the face of uncertainty (at the Fed) so many quarters and years out is that the Fed, in spite of its modesty about its remarkable forecasting facilities, is usually quite good… oh, no, not at forecasts, but at making quote-worthy prognostications.
Here are some of my favorite quotes from the current Chairman (I’d include some even more prescient calls from Benny the Jet’s predecessor, Alan Greenspan, but alas, I don’t want you to laugh so hard you start crying when you realize this isn’t funny.):
- October 20, 2005: “House prices have risen by nearly 25% over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”
- February 15, 2006: “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”
- March 28, 2007: “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”
- November 14, 2007: “We at the Fed will have to remain exceptionally alert and flexible [emphasis added, because I can] as we continue to access how best to promote sustainable economic growth and price stability in the United States.”
- February 14, 2008: “At present my baseline outlook involves a period of sluggish growth followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt.”
Someone should tell Benny that we’re still waiting to feel the effects of monetary and fiscal stimulus…
Keeping rates low led to cheap financing of leveraged speculation in the housing market.
Cheap money – which is considerably more expensive than “free” money (which is what the Fed has been giving away for years) – is not the answer.
To Say That I Have a “Problem” with the Fed Is like Calling the Grand Canyon a “Ditch”
The Fed has become a police force that’s taken free markets hostage so that their masters, the Big Banks, can loot and pillage taxpayers at will.
It’s insane. It’s criminal. And it has to stop.
The Fed doesn’t have to be shut down; it just has to be stomped on, really hard.
The Fed was a creation of the most powerful bankers in America. It was based on the Bank of England and the Bank of Switzerland. Not bad models. But its American banker creators created a de jure bank-led arm of government that actually controls the purse strings and wields its power in such a way that it has become the most powerful institution, not just in America, but in the world.
Color me crazy, but that’s too much power for anyone to have and to hold… and especially for my favorite class of citizens (bankers).
And because I feel that this is perhaps the most important issue facing America, what to do about the Federal Reserve’s power, I’m going to say to heck with the Democrats, to heck with the front-running Republican wannabes… let’s elect Ron Paul for the Libertarian that he really is.
Of course he can’t say he’s still a Libertarian. Otherwise he’d be outside the levers of power and money afforded the combatants in our grossly outdated two-party system. Which, by the way, isn’t anywhere in our Constitution.
I used to be a staunch pull-yourself-up-by-your-own-bootstraps kind of conservative.
When America elected an actor as president, I was going to move overseas. But I came to revere Ronald Reagan, not for everything he did (hated the massive deregulation spree), but for his character and objectiveness in the face of changing circumstances (he raised taxes 11 times).
You could say I was a Republican, until George W. Bush took us to war for the benefit of the military industrial complex, bankers, and his oil buddies. I hated his tax cuts even though I was a huge beneficiary of them. Don’t get me wrong, I hate paying taxes and I will use the tax code to my advantage wherever it is allowed. But we had surpluses coming out of the Clinton years, and that was brilliant.
Then I fell into the Democrat camp and fell in love with Barak Obama. So much for that love affair… “Where’s the beef?”
Today I don’t care a lick for Republicans or Democrats anymore. They’re all just politicians (more like vultures), fighting over every scrap of power they hope to wield to crush each other.
I care about America.
And if Ron Paul is going to be different than any Republican or Democrat, well, I’m for change that matters.
More than that, I’m for changing the Fed and for constructive, sensible, pragmatic, objectivism in America, for Americans, and for the world.
What scares me is the Fed’s actions are a threat to free markets, and that is a threat to capitalism.
Not that capitalism is perfect – far from it. But any alternative is anathema to me and to our Constitution.
And speaking of threats to capitalism…
Let’s Talk About Private Equity
No, I’m not going to go after Bain Capital and Mitt Romney today.
For heaven’s sake, leave the guy alone. Just because he made a fortune and pays an effective tax rate of 14.9% doesn’t make him a bad guy. It makes him a capitalist who played the game, won, and pays his taxes according to what the law requires. We can pick on him for other things, but not for being a successful capitalist.
But about that private equity model…
I’m not going to get into how the business works and whether they’re egalitarian capitalists or vulture capitalists, or what side of the creative destruction equation they’re on (they’re on both, so there). I just want to point out that one of their own, one of the biggest players in private equity in the world, is putting forward an idea that is about as anti-capitalist as they come…
The D.C.-based Carlyle Group wants to take itself public in an IPO. That’s good for them, but really bad for their shareholders and for everyone’s sense of free market capitalism.
What’s good for Carlyle is that they can raise a lot of money to make themselves (the three principal founding partners and a few other “partners”) vastly richer than they already are.
Good for them. That’s capitalism.
What’s bad for their would-be shareholders is that Carlyle plans to insulate itself permanently from class-action suits and any courtroom suits by any shareholders.
That’s bad for shareholders, which is bad for capitalism.
The buyout behemoth’s registration statement filed with the SEC requires future shareholders to resolve any and all claims against the soon-to-be public company by means of arbitration. In other words, they can’t sue the company or its officers or directors, for any reason, including fraud, in any court, ever.
Any action brought against the company by any shareholder or shareholders would have to be arbitrated in private and be entirely confidential. Entirely.
I don’t care about a lot of the other “stuff” in the company’s registration statement, stuff like shareholders have no ability to elect directors or fire them, nor do they have any say in the company’s business (what do you know about private equity, anyway?), what anybody gets paid, or pretty much anything that goes on at the company. That’s none of your business.
All that “stuff” is out there, and if shareholders accept their backseat, blindfolded ride to wherever they’re being taken, that’s up to them. If they get in and don’t like the ride, they can always vote with their feet and sell their shares.
What’s egregious is that Carlyle wants to take away the shareholder’s right to address their grievances in any court of law they choose, or have to, turn to, in an open public forum, which is the American way.
That is sickening.
And some private equity guys wonder why they’re in the limelight these days…
The SEC is going to have to rule on this, because preventing shareholder access to the courts by a public company is unprecedented. They will likely disallow it (thought that’s just my opinion, based on the scrutiny the SEC is getting lately as a regulatory body supposedly looking out for shareholders and governing public companies). And if they do, Carlyle may take its case to the Supreme Court, which, by the way, has in the recent past issued a series of “pro-arbitration” decisions.
These threats to capitalism are just more gasoline on the fire that rages over America’s future.
I, for one (and one for all), call on you to join your voices with mine in defending free markets and American capitalism before we lose both to the oligarchy of banker fat-cats that brought us class warfare and economic Armageddon.